Foreign Tax Credit (FTC) AY 2026-27

Foreign Tax Credit (FTC)

What Is FTC?

FTC allows a resident person to claim credit for taxes paid abroad on income also taxed in India.

Key Points on FTC

1. Year of Credit: FTC is allowed in the year the foreign income is taxed in India.
2. Amount of Credit: FTC is limited to the lower of Indian tax payable or foreign tax paid.
3. Disputed Taxes: FTC is not allowed for disputed foreign taxes until the dispute is resolved.
4. Conversion to INR: Foreign tax is converted to INR using specified rates.

Documents Required for FTC

1. Statement of income and tax inForm 67.
2. Certificate from the foreign tax authority or payer detailing income and tax paid.
3. Proof of tax payment or deduction.

Deadlines for Document Submission

• Original or belated return: End of the assessment year.
• Updated return: Before filing the updated return.

Unilateral Relief

If no DTAA exists with a foreign country, relief for taxes paid abroad is allowed if:

1. The taxpayer is an Indian resident.
2. The income is earned and taxed abroad.
3. Tax is paid in the foreign country.

Relief is a deduction based on the lower tax rate between the two countries.